UNITED STATES
	SECURITIES AND EXCHANGE COMMISSION
	Washington, D.C. 20549

	FORM 10-Q

[X]	Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2001 or

[ ]	Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________________to_____________

Commission File Number 0-13299


	DEAN WITTER CORNERSTONE FUND III

	(Exact name of registrant as specified in its charter)


		New York						     13-3190919
(State or other jurisdiction of		      (I.R.S. Employer
incorporation or organization)			      Identification No.)


c/o Demeter Management Corporation
Two World Trade Center, 62 Fl., New York, NY    	  10048
(Address of principal executive offices)	  	     (Zip Code)


Registrant's telephone number, including area code (212) 392-5454




(Former name, former address, and former fiscal year, if changed
since last report)



Indicate by check-mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes    X       No__________





<page>
<table>
DEAN WITTER CORNERSTONE FUND III

	INDEX TO QUARTERLY REPORT ON FORM 10-Q

	June 30, 2001

<caption>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

				<c>
	Statements of Financial Condition as of
	June 30, 2001 (Unaudited) and December 31, 2000............2

	Statements of Operations for the Quarters Ended
	June 30, 2001 and 2000 (Unaudited).........................3

	Statements of Operations for the Six Months Ended
	June 30, 2001 and 2000 (Unaudited).........................4

	Statements of Changes in Partners' Capital for the
	Six Months Ended June 30, 2001 and 2000 (Unaudited)........5

	Statements of Cash Flows for the Six Months Ended
	June 30, 2001 and 2000 (Unaudited).........................6

	Notes to Financial Statements (Unaudited)...............7-11

Item 2. Management's Discussion and Analysis of Financial
			Condition and Results of Operations.............. 12-21

Item 3.	Quantitative and Qualitative Disclosures about
			Market Risk ......................................21-34

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings...................................35

Item 6.  Exhibits and Reports on Form 8-K.................35-36




</table>








<page>
<table>
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

	DEAN WITTER CORNERSTONE FUND III
	STATEMENTS OF FINANCIAL CONDITION

<caption>	  June 30,	     December 31,
                                              2001   	    2000
	$	   $
	(Unaudited)

ASSETS

	<c>	<c>
Equity in futures interests trading accounts:
	Cash	25,700,955	 24,902,313

	Net unrealized gain on open contracts (MS & Co.)  	657,638	3,944,253
	Net unrealized loss on open contracts (MSIL)	    (39,160)	   (91,422)

	Total net unrealized gain on open contracts	618,478	   3,852,831

	Net option premiums	   (46,634)	   (32,422)

	    Total Trading Equity	26,272,799	28,722,722

Interest receivable (Morgan Stanley DW)	61,528            	105,983
Due from Morgan Stanley DW	        30,898	          38,685

    	     Total Assets	   26,365,225 	    28,867,390

LIABILITIES AND PARTNERS' CAPITAL

Liabilities

	Redemptions payable	187,790	    286,259
	Accrued administrative expenses	139,186	106,179
	Accrued management fees 	       76,492	          83,887

	     Total Liabilities	     403,468	        476,325

Partners' Capital

    Limited Partners (8,802.495 and
	     9,204.671 Units, respectively)	25,549,302	27,959,423
    General Partner (142.103 Units)	     412,455	        431,642

	     Total Partners' Capital	  25,961,757	  28,391,065

Total Liabilities and Partners' Capital	  26,365,225	  28,867,390

NET ASSET VALUE PER UNIT	       2,902.51	       3,037.53
<fn>

	The accompanying notes are an integral part
	of these financial statements.
</table>

 <page>
<table>
DEAN WITTER CORNERSTONE FUND III
	STATEMENTS OF OPERATIONS
(Unaudited)


<caption>


	     For the Quarters Ended June 30,

	      2001   	   2000
	    $	   $

REVENUES

			<c>	<c>
	Trading loss:
	   Realized	(719,527)	(1,906,624)
 	   Net change in unrealized	   (2,550,932)	(1,033,828)

			Total Trading Results	(3,270,459)	(2,940,452)

	Interest income (Morgan Stanley DW)	      202,868	     339,495

			Total	   (3,067,591)	(2,600,957)


EXPENSES

	Brokerage commissions (Morgan Stanley DW)	376,106	395,208
  	Management fees	235,835	285,482
  	Transaction fees and costs	24,422	24,814
	Administrative expenses	       20,910	       18,934

  			Total 	     657,273	     724,438

NET LOSS 	(3,724,864)	(3,325,395)


NET LOSS ALLOCATION

	  Limited Partners	(3,666,611)	(3,279,418)
  	  General Partner	(58,253)	(45,977)


NET LOSS PER UNIT

	  Limited Partners	(409.93)	(323.55)
 	  General Partner	(409.93)	(323.55)



<fn>


	The accompanying notes are an integral part
	of these financial statements.
</table>
<page>
<table>
DEAN WITTER CORNERSTONE FUND III
	STATEMENTS OF OPERATIONS
(Unaudited)

<caption>

	    For the Six Months Ended June 30,

	      2001     	      2000
	    $	      $

REVENUES

			<c>	<c>
	Trading profit (loss):
	   Realized                                                                                   2,859,338 		(1,163,554)
  	   Net change in unrealized	     (3,234,353)	(1,777,978)

			Total Trading Results	(375,015)	(2,941,532)

	Interest income (Morgan Stanley DW)                                          486,330		     702,152

			Total                                                                                    111,315		(2,239,380)


EXPENSES

	Brokerage commissions (Morgan Stanley DW)                            728,071		873,542
  	Management fees                                                                          490,905		611,035
  	Transaction fees and costs                                                              51,930		48,508
 	Administrative expenses                                                                  39,037		       37,473

			Total                                                                                 1,309,943		   1,570,558

NET LOSS 	  (1,198,628)	(3,809,938)


NET LOSS ALLOCATION

		Limited Partners                                                                 (1,179,441)	(3,757,647)
 		General Partner                                                                       (19,187)	(52,291)


NET LOSS PER UNIT

		Limited Partners                                                                     (135.02)		(367.98)
  		General Partner                                                                      (135.02)		(367.98)

<fn>






	The accompanying notes are an integral part
	of these financial statements.
</table>
<page>
<table>
	DEAN WITTER CORNERSTONE FUND III
	STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
	For the Six Months Ended June 30, 2001 and 2000
	(Unaudited)


<caption>



	Units of
	Partnership	Limited	General
	   Interest   	Partners	Partner	Total
                                          $	                        $	                         $


	<c>	<c>	<c>	<c>
Partners' Capital,
  December 31, 1999	10,978.222	33,000,637	  432,765	 33,433,402

Net loss	-	(3,757,647)	(52,291)	(3,809,938)

Redemptions	  (989.026)	(2,877,883)	 ____-___	(2,877,883)

Partners' Capital,
  June 30, 2000	  9,989.196	26,365,107	380,474	26,745,581




Partners' Capital,
  December 31, 2000	9,346.774	27,959,423	  431,642	 28,391,065

Net loss	-	(1,179,441)	(19,187)	(1,198,628)

Redemptions	 (402.176)	(1,230,680)	 ____-___	(1,230,680)

Partners' Capital,
  June 30, 2001	 8,944.598	25,549,302	  412,455	25,961,757





<fn>










The accompanying notes are an integral part
	of these financial statements.
</table>
<page>
<table>
	DEAN WITTER CORNERSTONE FUND III
	STATEMENTS OF CASH FLOWS
(Unaudited)


<caption>

	    For the Six Months Ended June 30,

	      2001     	      2000
	    $	      $

CASH FLOWS FROM OPERATING ACTIVITIES

			<c>	<c>
Net loss 	                                                                                         (1,198,628)	(3,809,938)
Noncash item included in net loss:
		Net change in unrealized	3,234,353	1,777,978

(Increase) decrease in operating assets:
		Net option premiums	14,212	446,406
		Interest receivable (Morgan Stanley DW)	                                44,455  	                   8,398
		Due from Morgan Stanley DW	7,787	 (2,450)

Increase (decrease) in operating liabilities:
		Accrued administrative expenses                                            33,007	                          1,119
		Accrued management fees                                                 	     (7,395)	        (22,510)

Net cash provided by (used for) operating activities	   2,127,791	   (1,600,997)


CASH FLOWS FROM FINANCING ACTIVITIES

Decrease in redemptions payable                                                       (98,469)	(65,258)
Redemptions of Units                                                                      (1,230,680)	   (2,877,883)

Net cash used for financing activities                                             (1,329,149)	   (2,943,141)

Net increase (decrease) in cash	798,642	(4,544,138)

Balance at beginning of period	   24,902,313	  32,268,788

Balance at end of period	  25,700,955	  27,724,650





<fn>




	The accompanying notes are an integral part
	of these financial statements.

</table>

<page>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS

June 30, 2001
(Unaudited)
The unaudited financial statements contained herein include, in
the opinion of management, all adjustments necessary for a fair
presentation of the results of operations and financial condition
of Dean Witter Cornerstone Fund III (the "Partnership").  The
financial statements and condensed notes herein should be read in
conjunction with the Partnership's December 31, 2000 Annual Report
on Form 10-K.

1. Organization
Dean Witter Cornerstone Fund III is a New York limited partnership
organized to engage primarily in the speculative trading of
futures contracts, options on futures contracts, and forward
contracts on foreign currencies and other commodity interests. The
Partnership is one of the Dean Witter Cornerstone Funds, comprised
of Dean Witter Cornerstone Fund II, the Partnership, and Dean
Witter Cornerstone Fund IV.

The general partner is Demeter Management Corporation
("Demeter"). The non-clearing commodity broker is Morgan Stanley
DW Inc. ("Morgan Stanley DW").  Dean Witter Reynolds Inc. changed
its name to Morgan Stanley DW Inc., effective April 2, 2001. The
clearing commodity brokers are Morgan Stanley & Co., Inc. ("MS &

<page>
DEAN WITTER CORNERSTONE FUND III
	NOTES TO FINANCIAL STATEMENTS (CONTINUED)


Co.") and Morgan Stanley & Co. International Limited ("MSIL").
Demeter, Morgan Stanley DW, MS & Co. and MSIL are wholly-owned
subsidiaries of Morgan Stanley Dean Witter & Co.  The trading
managers to the Partnership are Welton Investment Corporation and
Sunrise Capital Management Inc. (collectively, the "Trading
Managers").

2. Related Party Transactions
The Partnership's cash is on deposit with Morgan Stanley DW, MS &
Co. and MSIL in futures, forwards and options trading accounts to
meet margin requirements as needed. Morgan Stanley DW pays
interest on these funds based on current 13-week U.S. Treasury
bill rates.  The Partnership pays brokerage commissions to Morgan
Stanley DW.

3.  Financial Instruments
The Partnership trades futures contracts, options on futures
contracts, and forward contracts on foreign currencies and other
commodity interests. Futures and forwards represent contracts for
delayed delivery of an instrument at a specified date and price.
Risk arises from changes in the value of these contracts and the
potential inability of counterparties to perform under the terms


<page>
DEAN WITTER CORNERSTONE FUND III
	NOTES TO FINANCIAL STATEMENTS (CONTINUED)

of the contracts.  There are numerous factors which may
significantly influence the market value of these contracts,
including interest rate volatility.

The Partnership accounts for its derivative investments in
accordance with the provisions of Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133").  SFAS No.
133 defines a derivative as a financial instrument or other
contract that has all three of the following characteristics:

1)	One or more underlying notional amounts or payment
provisions;
2)	Requires no initial net investment or a smaller initial net
investment than would be required relative to changes in
market factors;
3)	Terms require or permit net settlement.

Generally derivatives include futures, forward, swaps or option
contracts and other financial instruments with similar
characteristics such as caps, floors and collars.






<page>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The net unrealized gains on open contracts, reported as a
component of "Equity in futures interests trading accounts" on
the statements of financial condition and their longest contract
maturity were as follows:
                    Net Unrealized Gains on Open
                             Contracts                   Longest Maturity

   	            Exchange-   Off-Exchange-            Exchange-  Off-Exchange-
                   Traded       Traded       Total       Traded      Traded
Date              Contracts    Contracts   Contracts    Contracts   Contracts
                       $           $		     $

June 30, 2001        618,400        78      618,478      June 2002   Sept. 2001

December 31, 2000  3,576,953   275,878    3,852,831      Dec. 2001   March 2001


The Partnership has credit risk associated with counterparty non-
performance.  The credit risk associated with the instruments in
which the Partnership is involved is limited to the amounts
reflected in the Partnership's statements of financial condition.

The Partnership also has credit risk because Morgan Stanley DW, MS
& Co. and MSIL act as the futures commission merchants or the
counterparties, with respect to most of the Partnership's assets.
Exchange-traded futures and futures-styled options contracts are
marked to market on a daily basis, with variations in value
settled on a daily basis. Morgan Stanley DW, MS & Co., and MSIL
each as a futures commission merchant for all of the Partnership's

<page>
DEAN WITTER CORNERSTONE FUND III
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)

exchange-traded futures and futures-styled options contracts, are
required, pursuant to regulations of the Commodity Futures Trading
Commission ("CFTC"), to segregate from their own assets, and for
the sole benefit of their commodity customers, all funds held by
them with respect to exchange-traded futures and futures-styled
options contracts, including an amount equal to the net unrealized
gain on all open futures and futures-styled options contracts,
which funds, in the aggregate, totaled $26,319,355 and $28,479,266
at June 30, 2001 and December 31, 2000, respectively. With respect
to the Partnership's off-exchange-traded forward currency
contracts, there are no daily settlements of variations in value
nor is there any requirement that an amount equal to the net
unrealized gain on open forward contracts be segregated.  With
respect to those off-exchange-traded forward currency contracts,
the Partnership is at risk to the ability of MS & Co., the sole
counterparty on all of such contracts, to perform.  The
Partnership has a netting agreement with MS & Co.  This agreement,
which seeks to reduce both the Partnership's and MS & Co.'s
exposure on off-exchange-traded forward currency contracts, should
materially decrease the Partnership's credit risk in the event of
MS & Co.'s bankruptcy or insolvency.


<page>

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS


Liquidity - The Partnership deposits its assets with Morgan
Stanley DW as non-clearing broker and MS & Co. and MSIL as
clearing brokers in separate futures, forwards and options trading
accounts established for each Trading Manager, which assets are
used as margin to engage in trading. The assets are held in either
non-interest-bearing bank accounts or in securities and
instruments permitted by the CFTC for investment of customer
segregated or secured funds.  The Partnership's assets held by the
commodity brokers may be used as margin solely for the
Partnership's trading.  Since the Partnership's sole purpose is to
trade in futures, forwards, and options, it is expected that the
Partnership will continue to own such liquid assets for margin
purposes.

The Partnership's investment in futures, forwards, and options
may, from time to time, be illiquid.  Most U.S. futures exchanges
limit fluctuations in prices during a single day by regulations
referred to as "daily price fluctuations limits" or "daily
limits".  Trades may not be executed at prices beyond the daily
limit.  If the price for a particular futures or options contract
has increased or decreased by an amount equal to the daily limit,
positions in that futures or options contract can neither be taken
nor liquidated unless traders are willing to effect trades at or
<page>
within  the  limit.  Futures prices have occasionally moved the
daily limit for several consecutive days with little or no
trading.  These market conditions could prevent the Partnership
from promptly liquidating its futures or options contracts and
result in restrictions on redemptions.

There is no limitation on daily price moves in trading forward
contracts on foreign currencies.  The markets for some world
currencies have low trading volume and are illiquid, which may
prevent the Partnership from trading in potentially profitable
markets or prevent the Partnership from promptly liquidating
unfavorable positions in such markets, subjecting it to
substantial losses.  Either of these market conditions could
result in restrictions on redemptions.

The Partnership has never had illiquidity affect a material
portion of its assets.

Capital Resources - The Partnership does not have, or expect to
have, any capital assets.  Redemptions of additional units of
limited partnership interest ("Unit(s)") in the future will
affect the amount of funds available for investment in futures,
forwards and options in subsequent periods.  It is not possible
to estimate the amount and therefore the impact of future
redemptions of Units.

<page>
Results of Operations
General.  The Partnership's results depend on its Trading Managers
and the ability of the Trading Managers' trading programs to take
advantage of price movements or other profit opportunities in the
futures, forwards, and options markets.  The following presents a
summary of the Partnership's operations for the three and six
month periods ended June 30, 2001 and 2000, and a general
discussion of its trading activities during each period.  It is
important to note, however, that the Trading Managers trade in
various markets at different times and that prior activity in a
particular market does not mean that such market will be actively
traded by the Trading Managers or will be profitable in the
future. Consequently, the results of operations of the Partnership
are difficult to discuss other than in the context of its Trading
Managers' trading activities on behalf of the Partnership as a
whole and how the Partnership has performed in the past.

For the Quarter and Six Months Ended June 30, 2001
For the quarter ended June 30, 2001, the Partnership recorded
total trading losses, net of interest income, of $3,067,591 and
posted a decrease in net asset value per Unit.  The most
significant losses of approximately 6.5% were recorded in the
global interest rate futures markets primarily during early April
from long positions in U.S. interest rate futures as bond prices
reversed sharply lower as investors deserted risk-free government
securities in an asset shift to equities.  Losses were also
<page>
recorded during April from long positions in European interest
rate futures as prices moved lower on reports of the European
Central Bank's decision to leave interest rates on hold.  During
late June, additional losses were recorded from long positions in
U.S. interest rate futures as prices dropped because of the dim
outlook for further aggressive interest rate cuts by the U.S.
Federal Reserve.  In the currency markets, losses of
approximately 3.2% were recorded primarily during early April and
May from short positions in the Japanese yen as its value
reversed higher versus the U.S. dollar sparked by optimism
towards reform for the weakened Japanese economy.  During early
June, additional losses were experienced from long positions in
the Japanese yen as its value reversed lower after showing signs
of strengthening in May. In the metals markets, losses of
approximately 1.6% were recorded during late April from short
gold futures positions as prices climbed higher on the weakness
of the U.S. dollar.  During late May, losses were experienced
from newly established long gold futures positions as prices
reversed sharply lower following the return of more bearish
sentiment regarding the outlook for the U.S. economy.  These
losses were partially offset by gains of approximately 0.2%
recorded in the soft commodities markets throughout a majority of
the quarter from short cotton futures positions as prices moved
lower due to declining demand.  In the agricultural markets,
profits of approximately 0.2% were recorded from short corn
futures positions as prices declined on forecasts for favorable
<page>
weather conditions in the U.S. Midwest and on reports of
declining demand.  Total expenses for the three months ended June
30, 2001 were $657,273, resulting in a net loss of $3,724,864.
The net asset value of a Unit decreased from $3,312.44 at March
31, 2001 to $2,902.51 at June 30, 2001.


For the six months ended June 30, 2001, the Partnership recorded
total trading revenues, including interest income, of $111,315
and, after expenses, posted a decrease in net asset value per
Unit.  The most significant losses of approximately 4.5% were
recorded in the energy markets throughout the first six months of
the year from positions in crude oil futures and its related
products as a result of volatility in oil prices due to a
continually changing outlook for inventory, supply, production
and demand.  In the metals markets, losses of approximately 1.8%
were recorded during late April from short gold futures positions
as prices climbed higher on the weakness of the U.S. dollar.
During late May, losses were experienced from newly established
long gold futures positions as prices reversed sharply lower
following the return of more bearish sentiment regarding the
outlook for the U.S. economy.  In the currency markets, losses of
approximately 1.6% were recorded from cross-rate positions in the
euro versus the Japanese yen and from positions in the Australian
dollar relative to the U.S. dollar.  These losses were partially

<page>
offset by gains of approximately 3.2% recorded in the global
interest rate futures markets throughout the first quarter from
long positions in Japanese interest rate futures as prices moved
higher amid weak Japanese stock prices and disappointing economic
data in that country.  In the soft commodities markets, gains of
approximately 1.3% were recorded throughout a majority of the
first and second quarters from short cotton futures positions as
prices moved lower on weak export sales and low demand.  Total
expenses for the six months ended June 30, 2001 were $1,309,943,
resulting in a net loss of $1,198,628.  The net asset value of a
Unit decreased from $3,037.53 at December 31, 2000 to $2,902.51
at June 30, 2001.

For the Quarter and Six Months Ended June 30, 2000
For the quarter ended June 30, 2000, the Partnership recorded
total trading losses, net of interest income, of $2,600,957 and
posted a decrease in net asset value per Unit.  The most
significant losses of approximately 4.6% were recorded in the
currency markets primarily from short positions in the Japanese
yen as the value of the yen strengthened versus the U.S. dollar
during May and early June amid positive economic data out of
Japan and the perception that interest rates in the U.S. may have
topped out.  Additional losses of approximately 4.1% were
experienced in the global stock index futures markets primarily
from long S&P 500 Index futures positions as domestic equity

<page>
prices declined sharply during April due to an unexpected jump in
the Consumer Price Index, fears of inflation and concerns
regarding interest rate increases.  In the global interest rate
futures markets, losses of approximately 2.1% were incurred
primarily from long U.S. interest rate futures positions as
prices declined during April amid fears of higher interest rates.
During June, newly established short U.S. interest rate futures
positions incurred additional losses as prices moved higher amid
signs that U.S. economic growth has slowed and fading prospects
of additional interest rate hikes by the Federal Reserve.  Losses
were also recorded in this market complex from long positions in
German bund futures as European bond prices moved lower due to
the weakness in U.S. bonds and the sharp decline in the euro
during April.  In the metals markets, losses of approximately
1.5% were incurred primarily from short aluminum futures
positions during June as prices reversed sharply higher on
institutional buying and fears that U.S. capacity could be hit
further by power shortages.  Losses were also experienced in the
agricultural markets of approximately 0.4% primarily from long
soybean futures positions as prices moved lower during April and
May due to heavy rain in the U.S. soy growing regions.  A portion
of overall Partnership losses was offset by gains recorded in the
energy markets of approximately 2.6% primarily from long natural
gas futures positions as prices moved to four-year highs during
May amid supply woes.  Additional gains of approximately 0.4%
were recorded in the soft commodities markets from short coffee

<page>
futures positions as prices declined on technical factors during
April.  Long sugar futures positions were also profitable as
prices trended to 22-month highs later in the quarter on reports
of lower plantings and speculation that the world's surplus could
shrink.  Total expenses for the three months ended June 30, 2000
were $724,438, resulting in a net loss of $3,325,395.  The net
asset value of a Unit decreased from $3,001.00 at March 31, 2000
to $2,677.45 at June 30, 2000.

For the six months ended June 30, 2000, the Partnership recorded
total trading losses, net of interest income, of $2,239,380 and
posted a decrease in net asset value per Unit.  The most
significant losses of approximately 5.0% were recorded in the
global stock index futures markets primarily from long S&P 500
Index futures positions as global equity prices reversed lower in
January amid fears of interest rate hikes in the U.S. and Europe
and profit-taking from the previous year.  Additional losses were
incurred from long S&P 500 Index futures positions as domestic
equity prices declined sharply during April due to an unexpected
jump in the Consumer Price Index, fears of inflation and concerns
regarding interest rate increases.  Additional losses of
approximately 4.6% were recorded in the global interest rate
futures markets primarily from long U.S. interest rate futures
positions as prices declined during April amid fears of higher
interest rates.  During June, newly established short U.S.
<page>
interest rate futures positions incurred losses as prices moved
higher amid signs that U.S. economic growth has slowed and fading
prospects of additional interest rate hikes by the Federal
Reserve.  Losses were also recorded in this market complex from
long positions in German bund futures as European bond prices
moved lower due to the weakness in U.S. bonds and the sharp
decline in the euro during April.  In the metals markets, losses
of approximately 2.5% resulted primarily from long aluminum
futures positions as prices reversed lower during February on
technical factors.  Short aluminum futures positions resulted in
losses during June as prices reversed sharply higher on
institutional buying and fears that U.S. capacity could be hit
further by power shortages.  In the currency markets, losses of
approximately 0.9% were incurred primarily from short Japanese yen
positions as the yen's value strengthened versus the U.S. dollar
during May amid positive economic data out of Japan and during the
first half of June on the perception that interest rates in the
U.S. may have topped out.  Additional currency losses resulted
from long British pound positions as the pound's value weakened
versus the U.S. dollar on interest rate increases by the European
Central Bank and U.S. Federal Reserve.  These losses were
partially offset by gains recorded from short euro positions as
its value weakened versus the U.S. dollar during January on
skepticism about Europe's economic outlook, followed by notable
weakness during March and April on the European Central Bank's
passive stance towards its currency.  Smaller losses of
<page>
approximately 0.8% were recorded in the agricultural markets from
short corn futures positions as prices increased during January
after the USDA made a surprise cut to 1999-2000 ending stocks amid
concerns for dryness in Brazil and subsequent crop damage.  A
portion of overall Partnership losses was offset by gains recorded
in the energy markets of approximately 3.8% primarily from long
crude oil futures positions as oil prices powered to nine-year
highs on concerns about future output levels amid dwindling
stockpiles and increasing demand and frigid weather in the
Northeastern U.S.  Additional gains of approximately 0.4% were
recorded in the soft commodities markets primarily during June
from long positions in sugar futures as sugar prices trended to
22-month highs due to strong demand and declining production from
Brazil.  Total expenses for the six months ended June 30, 2000
were $1,570,558, resulting in a net loss of $3,809,938.  The net
asset value of a Unit decreased from $3,045.43 at December 31,
1999 to $2,677.45 at June 30, 2000.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
        RISK

Introduction
The Partnership is a commodity pool engaged primarily in the
speculative trading of futures, forwards and options.  The market-
sensitive instruments held by the Partnership are acquired for
speculative trading purposes only and, as a result, all or
substantially all of the Partnership's assets are at risk of
trading loss. Unlike an operating company, the risk of market-
<page>
sensitive instruments is central, not incidental, to the
Partnership's main business activities.

The futures, forwards, and options traded by the Partnership
involve varying degrees of related market risk.  Market risk is
often dependent upon changes in the level or volatility of
interest rates, exchange rates, and prices of financial
instruments and commodities. Fluctuations in market risk based
upon these factors result in frequent changes in the fair value
of the Partnership's open positions, and, consequently, in its
earnings and cash flow.

The Partnership's total market risk is influenced by a wide
variety of factors, including the diversification among the
Partnership's open positions, the volatility present within the
markets, and the liquidity of the markets.  At different times,
each of these factors may act to increase or decrease the market
risk associated with the Partnership.

The Partnership's past performance is not necessarily indicative
of its future results.  Any attempt to numerically quantify the
Partnership's market risk is limited by the uncertainty of its
speculative trading.  The Partnership's speculative trading may
cause future losses and volatility (i.e. "risk of ruin") that far
exceed the Partnership's experiences to date or any reasonable
expectations based upon historical changes in market value.
<page>
Quantifying the Partnership's Trading Value at Risk
The following quantitative disclosures regarding the Partnership's
market risk exposures contain "forward-looking statements" within
the meaning of the safe harbor from civil liability provided for
such statements by the Private Securities Litigation Reform Act of
1995 (set forth in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934).  All
quantitative disclosures in this section are deemed to be forward-
looking statements for purposes of the safe harbor, except for
statements of historical fact.

The Partnership accounts for open positions using mark-to-market
accounting principles.  Any loss in the market value of the
Partnership's open positions is directly reflected in the
Partnership's earnings, whether realized or unrealized, and its
cash flow.  Profits and losses on open positions of exchange-
traded futures, forwards and options are settled daily through
variation margin.

The Partnership's risk exposure in the market sectors traded by
the Trading Managers is estimated below in terms of Value at Risk
("VaR"). The VaR model used by the Partnership includes many
variables that could change the market value of the Partnership's



<page>
trading portfolio.  The Partnership estimates VaR using a model
based upon historical simulation with a confidence level of 99%.
Historical simulation involves constructing a distribution of
hypothetical daily changes in the value of a trading portfolio.
The VaR model takes into account linear exposures to price and
interest rate risk.  Market risks that are incorporated in the
VaR model include equity and commodity prices, interest rates,
foreign exchange rates, and correlation among these variables.
The hypothetical changes in portfolio value are based on daily
percentage changes observed in key market indices or other market
factors ("market risk factors") to which the portfolio is
sensitive.  The historical observation period of the Partner-
ship's VaR is approximately four years.  The one-day 99%
confidence level of the Partnership's VaR corresponds to the
negative change in portfolio value that, based on observed market
risk factors, would have been exceeded once in 100 trading days.

VaR models, including the Partnership's, are continuously
evolving as trading portfolios become more diverse and modeling
techniques and systems capabilities improve.  Please note that
the VaR model is used to numerically quantify market risk for
historic reporting purposes only and is not utilized by either
Demeter or the Trading Managers in their daily risk management
activities.




<page>

The Partnership's Value at Risk in Different Market Sectors
The following table indicates the VaR associated with the
Partnership's open positions as a percentage of total net assets
by primary market risk category at June 30, 2001 and 2000. At
June 30, 2001 and 2000, the Partnership's total capitalization
was approximately $26 million and $27 million, respectively.
	Primary Market         June 30, 2001	     June 30, 2000
     Risk Category	  	   Value at Risk	 	Value at Risk

	Currency				  (1.90)%			   (0.53)%
Interest Rate			  (1.46)			   (1.12)
	Equity	 			  (0.23)			   (0.34)
	Commodity				  (0.94)			   (1.65)
Aggregate Value at Risk	  (2.58)%			   (1.94)%

Aggregate Value at Risk represents the aggregate VaR of all the
Partnership's open positions and not the sum of the VaR of the
individual market categories listed above.  Aggregate VaR will be
lower as it takes into account correlation among different
positions and categories.

The table above represents the VaR of the Partnership's open
positions at June 30, 2001 and 2000 only and is not necessarily
representative of either the historic or future risk of an
investment in the Partnership. Because the Partnership's only
business is the speculative trading of futures, forwards and
options, the composition of its trading portfolio can change
<page>
significantly over any given time period, or even within a single
trading day. Any changes in open positions could positively or
negatively materially impact market risk as measured by VaR.

The table below supplements the quarter-end VaR by presenting the
Partnership's high, low and average VaR, as a percentage of total
net assets for the four quarterly reporting periods from July 1,
2000 through June 30, 2001.
Primary Market Risk Category        High      Low      Average
Currency	(1.90)%	 (1.07)%	 (1.49)%

Interest Rate	(2.55)	 (0.87)	 (1.85)

Equity	(0.40)	 (0.01)	 (0.22)

Commodity	(1.56)	 (0.74)	 (1.05)

Aggregate Value at Risk	(3.49)%	 (2.30)%	 (2.82)%


Limitations on Value at Risk as an Assessment of Market Risk

The face value of the market sector instruments held by the
Partnership is typically many times the applicable margin
requirements.  Margin requirements generally range between 2% and
15% of contract face value. Additionally, the use of leverage
causes the face value of the market sector instruments held by
the Partnership to typically be many times the total
capitalization of the Partnership.  The value of the
Partnership's open positions thus creates a "risk of ruin" not
usually found in other investments.  The relative size of the
positions held may cause the Partnership to incur losses greatly
<page>
in excess of VaR within a short period of time, given the effects
of the leverage employed and market volatility.  The VaR tables
above, as well as the past performance of the Partnership, give
no indication of such "risk of ruin". In addition, VaR risk
measures should be viewed in light of the methodology's
limitations, which include the following:
?	past changes in market risk factors will not always result in
accurate predictions of the distributions and correlations of
future market movements;
?	changes in portfolio value caused by market movements may
differ from those of the VaR model;
?	VaR results reflect past trading positions while future risk
depends on future positions;
?	VaR using a one-day time horizon does not fully capture the
market risk of positions that cannot be liquidated or hedged
within one day; and
?	the historical market risk factor data used for VaR estimation
may provide only limited insight into losses that could be
incurred under certain unusual market movements.

The VaR tables above present the results of the Partnership's VaR
for each of the Partnership's market risk exposures and on an
aggregate basis at June 30, 2001 and for the end of the four
quarterly reporting periods from July 1, 2000 through June 30,
2001.  Since VaR is based on historical data, VaR should not be
<page>
viewed as predictive of the Partnership's future financial
performance or its ability to manage or monitor risk.  There can
be no assurance that the Partnership's actual losses on a
particular day will not exceed the VaR amounts indicated above or
that such losses will not occur more than 1 in 100 trading days.

Non-Trading Risk
The Partnership has non-trading market risk on its foreign cash
balances not needed for margin.  These balances and any market
risk they may represent are immaterial.

At June 30, 2001, the Partnership's cash balance at Morgan Stanley
DW was approximately 93% of its total net asset value.  A decline
in short-term interest rates will result in a decline in the
Partnership's cash management income. This cash flow risk is not
considered to be material.

Materiality, as used throughout this section, is based on an
assessment of reasonably possible market movements and any
associated potential losses, taking into account the leverage,
optionality and multiplier features of the Partnership's market-
sensitive instruments, in relation to the Partnership's net
assets.

Qualitative Disclosures Regarding Primary Trading Risk Exposures
The following qualitative disclosures regarding the Partnership's
<page>
market risk exposures - except for (A) those disclosures that are
statements of historical fact and (B) the descriptions of how the
Partnership manages its primary market risk exposures - constitute
forward-looking statements within the meaning of Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act.
The Partnership's primary market risk exposures as well as the
strategies used and to be used by Demeter and the Trading Managers
for managing such exposures are subject to numerous uncertainties,
contingencies and risks, any one of which could cause the actual
results of the Partnership's risk controls to differ materially
from the objectives of such strategies.  Government interventions,
defaults and expropriations, illiquid markets, the emergence of
dominant fundamental factors, political upheavals, changes in
historical price relationships, an influx of new market
participants, increased regulation and many other factors could
result in material losses as well as in material changes to the
risk exposures and the risk management strategies of the
Partnership. Investors must be prepared to lose all or
substantially all of their investment in the Partnership.

The following were the primary trading risk exposures of the
Partnership at June 30, 2001, by market sector.  It may be
anticipated however, that these market exposures will vary
materially over time.


<page>
Currency.  The primary market exposure at June 30, 2001 was in
the currency sector.  The Partnership's currency exposure was to
exchange rate fluctuations, primarily fluctuations which disrupt
the historical pricing relationships between different currencies
and currency pairs.  Interest rate changes as well as political
and general economic conditions influence these fluctuations.
The Partnership trades in a large number of currencies, including
cross-rates - i.e., positions between two currencies other than
the U.S. dollar.  For the second quarter of 2001, the
Partnership's major exposures were to euro currency crosses and
outright U.S. dollar positions.  Outright positions consist of
the U.S. dollar vs. other currencies.  These other currencies
include major and minor currencies.  Demeter does not anticipate
that the risk profile of the Partnership's currency sector will
change significantly in the future.  The currency trading VaR
figure includes foreign margin amounts converted into U.S.
dollars with an incremental adjustment to reflect the exchange
rate risk inherent to the dollar-based Partnership in expressing
VaR in a functional currency other than dollars.

Interest Rate.  The next largest market exposure of the
Partnership at June 30, 2001 was to the global interest rate
complex.  Exposure was primarily spread across U.S., Japanese,
and German interest rate sectors.  Interest rate movements
directly affect the price of the sovereign bond futures positions
held by the Partnership and indirectly affect the value of its
<page>
stock index and currency positions.  Interest rate movements in
one country as well as relative interest rate movements between
countries materially impact the Partnership's profitability.  The
Partnership's primary interest rate exposure is generally to
interest rate fluctuations in the United States and the other G-7
countries.  The G-7 countries consist of France, U.S., Britain,
Germany, Japan, Italy and Canada.  Demeter anticipates that G-7
interest rates will remain the primary interest rate exposures of
the Partnership for the foreseeable future.  The changes in
interest rates which have the most effect on the Partnership are
changes in long-term, as opposed to short-term, rates.  Most of
the speculative futures positions held by the Partnership are in
medium to long-term instruments.  Consequently, even a material
change in short-term rates would have little effect on the
Partnership, were the medium to long-term rates to remain steady.

Equity.  The primary equity exposure at June 30, 2001 was to
equity price risk in the G-7 countries.  The stock index futures
traded by the Partnership are by law limited to futures on
broadly-based indices.  At June 30, 2001, the Partnership's
primary exposures were to the S&P 500 (U.S.) and Nikkei (Japan)
stock index.  The Partnership is primarily exposed to the risk of
adverse price trends or static markets in the U.S. and Japanese
indices.  Static markets would not cause major market changes but
would make it difficult for the Partnership to avoid being
"whipsawed" into numerous small losses.
<page>
Commodity
Metals.  The Partnership's primary metals market exposure at
June 30, 2001 was to fluctuations in the price of gold and
silver.  Although certain Trading Managers will from time to
time trade base metals such as copper, aluminum and nickel,
the principal market exposures of the Partnership have
consistently been to precious metals, such as gold and
silver.  Market exposure to precious metals was evident, as
gold prices continued to be volatile during the quarter.
Silver prices remained volatile over this period as well.
The Trading Managers have from time to time taken positions
as market opportunities develop.

Energy.  At June 30, 2001, the Partnership's energy exposure
was shared primarily by futures contracts in the crude oil
and natural gas markets.  Price movements in these markets
result from political developments in the Middle East,
weather patterns, and other economic fundamentals.  It is
possible that volatility will remain high.  Significant
profits and losses which have been experienced in the past
are expected to continue to be experienced in this market.
Natural gas has exhibited volatility in prices resulting
from weather patterns and supply and demand factors and may
continue in this choppy pattern.


<page>
Soft Commodities and Agriculturals.  At June 30, 2001, the
Partnership had exposure to the markets that comprise these
sectors.  Most of the exposure, was to the corn, wheat and
coffee markets.  Supply and demand inequalities, severe
weather disruption, and market expectations affect price
movements in these markets.

Qualitative Disclosures Regarding Non-Trading Risk Exposure
The following was the only non-trading risk exposure of the
Partnership at June 30, 2001:

Foreign Currency Balances.  The Partnership's primary
foreign currency balances at June 30, 2001 were in Japanese
yen and euros.  The Partnership controls the non-trading
risk of these balances by regularly converting these
balances back into dollars upon liquidation of their
respective positions.

Qualitative Disclosures Regarding Means of Managing Risk Exposure
The Partnership and the Trading Managers separately attempt to
manage the risk of the Partnership's open positions in
essentially the same manner in all market categories traded.
Demeter attempts to manage market exposure by diversifying the



<page>
Partnership's assets among different Trading Managers, each of
whose strategies focus on different market sectors and trading
approaches, and monitoring the performance of the Trading
Managers daily.  In addition, the Trading Managers establish
diversification guidelines, often set in terms of the maximum
margin to be committed to positions in any one market sector or
market-sensitive instrument.

Demeter monitors and controls the risk of the Partnership's non-
trading instrument, cash.  Cash is the only Partnership investment
directed by Demeter, rather than the Trading Managers.


















<page>
PART II.  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS
In April 2001, the Appellate Division of New York State dismissed
the class action previously disclosed in the Partnership's Form
10-K for the year ended December 31, 2000.  Because plaintiffs did
not exercise their right to appeal any further, this dismissal
constituted a final resolution of the case.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K
(A)	    Exhibits
	 3.01	    Limited Partnership Agreement of the Partnership,
 dated as of December 7, 	1983, as amended as of May
 11, 1984, is incorporated by reference to Exhibit
 3.01 of the Partnership's Annual Report on Form
 10-K for the fiscal year ended September 30, 1984
 (File No. 0-13299).

	10.01	    M	anagement Agreement among the Partnership, Demeter
 and Sunrise Capital Management Inc. formerly
 Sunrise Commodities Inc. dated as of November 15,
 1983, is incorporated by reference to Exhibit 10.03
 of the Partnership's Annual Report on Form 10-K for
 the fiscal year ended September 30, 1984 (File No.
 0-13299).

	10.02	    M	anagement Agreement among the Partnership, Demeter
 and Welton Investment Systems Corporation, dated as
 of July 1, 1996, is incorporated by reference to
 Exhibit 10.02 of the Partnership's Annual Report on
 Form 10-K for the fiscal year ended December 31,
 1997 (File No. 0-13299).

	10.03	    Dean Witter Cornerstone Funds Exchange Agreement,
dated as of May 31, 	1984, is incorporated by
reference to Exhibit 10.06 of the Partnership's
Annual Report on Form 10-K for the fiscal year
ended September 30, 1984 (File No. 0-13299).





<page>
	10.05	    	Amended and Restated Customer Agreement, dated as
of December 1, 1997, between the Partnership and
Dean Witter Reynolds Inc. is incorporated by
reference to Exhibit 10.05 of the Partnership's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 (File No. 0-13299).

10.06	    	Customer Agreement, dated as of December 1, 1997,
among the 	Partnership, Carr Futures, Inc. and Dean
Witter Reynolds Inc. is incorporated by reference
to Exhibit 10.06 of the Partnership's Annual Report
on Form 	10-K for the fiscal year ended December 31,
1998 (File No. 0-13299).

10.07	    International Foreign Exchange Master Agreement,
dated as of August 1, 1997, between the
Partnership and Carr Futures, Inc. is incorporated
by reference to Exhibit 10.07 of the Partnership's
Annual Report on Form 	10-K for the fiscal year
ended December 31, 1998 (File No. 0-13299).

10.08	    	Customer Agreement, dated as of May 1, 2000,
between Morgan Stanley & Co. Incorporated, the
Partnership and Dean Witter Reynolds Inc. is
incorporated by reference to Exhibit 10.07 of the
Partnership's  Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000, (File No. 0-
13299).

10.09	    	Amendment to Management Agreement between the
Partnership and Welton Investment Corporation,
dated November 30, 2000, is incorporated by
reference to the Partnership's report on Form 8-K
(File No. 0-13299), filed with the Securities and
Exchange Commission on January 3, 2001.

10.10	    	Amendment to Management Agreement between the
 Partnership and Sunrise Capital Management, Inc.,
 dated November 30, 2000, is incorporated by
 reference to the Partnership's report on Form
 8-K (File No. 0-13299), filed with the Securities
 and Exchange Commission on January 3, 2001.

(B)	      Reports on Form 8-K. - None.








<page>





	SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.




                    	Dean Witter Cornerstone Fund III
                               (Registrant)

                           	By:	Demeter Management Corporation
		(General Partner)

August 14, 2001               By:/s/Raymond E. Koch
                                    Raymond E. Koch
                                    Chief Financial Officer





The General Partner which signed the above is the only party
authorized to act for the Registrant.  The Registrant has no
principal executive officer, principal financial officer,
controller, or principal accounting officer and has no Board of
Directors.